Casey’s is generating strong prepared food traffic, taking real share from restaurants. | Photo courtesy of Casey’s.
We wrote yesterday about Casey’s push into chicken wings, and why the company believes it can generate the kind of sales with that product that it does with pizza.
But I want to highlight two quotes from CEO Darren Rebelez, in a media briefing on Thursday.
First, is this:
“Food-away-from-home CPI increased 14% over the past three years,” he said. “We only took 5% menu price over that period. So when consumers’ wallets are a little pinched, we offer restaurant-quality food across all three dayparts at a significant value relative to QSR.”
Our own test of Casey’s chicken wings—which were universally praised in the Maze Household—came at a cost $5 less than a similar order with Wingstop. Casey’s fed myself and my two children plenty of wings and fries and sauce for less than $30.
And then there’s this quote:
“Our prepared food traffic grew 13% while the QSR industry was down about 1%,” he said.
Casey’s push into prepared food has helped that company outperform other convenience-store chains, which are facing many of the same economic headaches as the restaurant industry.
Low-income consumers are stretched by years of inflation and their wages are not yet growing enough for them to effectively deal with it. The c-store industry is likewise saturated. That means there are winners and losers.
By pushing further into food, Casey’s is pushing into a business that can provide it with some real growth. And the prepared food generates traffic from customers that buy other things.
That means it can keep prices low, because customers will buy other things, too. “People are coming to our stores to buy our prepared foods,” Rebelez said. “And they’re also buying our fuel.”
But Casey’s prepared food business is eating into restaurant industry market share. As my colleague Alicia Kelso wrote, Casey’s pizza business has taken market share from Pizza Hut throughout the Midwest.
Restaurants have spent the past couple of years learning an ugly lesson on pricing. As their own costs took off, many operators raised prices enough to keep their margins. They would later pay the price in the form of lost traffic.
The result has left behind brands with a low value proposition. Companies with prices higher than their perceived value have lost business. Those that kept price hikes to a minimum, or whose offerings in particular resonated with their customers, have won market share.
While a lot of the inflationary push in recent years was due to factors beyond operators’ control, like the cost of labor or insurance, some of it is within their control. Many restaurant chains are highly leveraged, and for reasons that have nothing to do with actual company expansion or investment. Many of their operators are, too.
Franchisors, meanwhile, push a lot of costs onto their franchisees. They take vendor rebates to profit off their supply chain. They demand costly remodels without providing assistance and without a proven return. They increase royalties and technology fees and demand the use of expensive equipment.
The result of all of it is higher prices, which have now forced a discount war that is only getting the same, dwindling number of customers to pay less when they visit. And now other companies in other industries, like convenience stores, are taking full advantage.
